ents, that meant having an adequate down payment,
making an emotional appeal to the sellers, and figuring out their best possible offer.

Consider bank-owned properties, too. Some banks
with REO properties still on their books are actively
seeking out residential buyers over investors. Mark
Greenwell, broker-associate at Watson Realty Corp.,
also in Jacksonville, says he has seen a growing number of banks over the last year seek to attract a wider
pool of buyers by investing considerable funds to fix
up foreclosures. “Banks are going in and replacing
HVAC systems, repainting, putting in new carpeting—
they’re doing it because they’re getting more money
and more buyers in the end,” Greenwell says.

In Detroit, too, banks are making a concerted
effort to get REO homes into the hands of residential
buyers, according to Michael Shannon, GRI, principal
broker at Metropolitan Real Estate in Garden City,
Mich. Even though investor interest in the local market remains high, Shannon says, banks are now typically not accepting bids from investors for the first
two weeks after a property is listed. Often, buyer
demand is so strong— 11 to 17 offers are typical for a
property, Shannon says—that potential home buyers
outbid investors. “Investors were used to getting
houses for $20,000; now those same houses are
selling for $50,000,” he says.

Easing Buyer Fears

But even as traditional buyers move back into the
market, they may feel anxiety about buying in areas
where rentals have proliferated.

There’s skepticism about how well-equipped
institutional owners are to manage and maintain
single-family rentals. In REALTOR® Magazine’s July/
August 2014 issue, Chris Herbert, research director
for the Joint Center for Housing Studies at Harvard
University, called the task of managing individual
properties on this scale “unprecedented.” And while
most consumers don’t see that big picture, they are
sensitive to changes in their neighborhood.

Heidi Kasama, ABR, managing broker at Berkshire
Hathaway HomeServices Nevada Properties, recently saw a past client give up on the condo he loved
after his neighborhood filled with renters.

“I sold him a very nice condo in a gated condo
community—it had a pool, cobblestone street,
walking trails—for around $250,000,” Kasama says.

“After the market collapse, you could buy a condo forunder $100,000. The community became a lot moresingle professionals, and then suddenly you hadinvestors picking them up and renting them out. Myclient wanted to move out of the area because it nolonger had the feel it used to have.”That unease extends to buyers, too. “One hun-dred percent of the time, when I’ve shown a homewhere there’s a rental sign next door, the buyerdecided not to buy,” says Christina Cavins, an agentwith Irongate Inc., REALTORS®, in Dayton, Ohio.“The assumption is that the pride of ownership is notthere with a rental property.”Kasama, too, says she’s seen many buyers decideto look elsewhere once they learn that a neighbor-hood has a lot of rentals. “When your neighbors aremoving out every other month, it’s not attractive tothose who want to live there permanently,” she says.An underlying concern, of course, is how nearbyrentals will affect home values. A 2013 Penn StateUniversity study published in the Journal of UrbanEconomics bears out the point. It looked at AmericanHousing Survey data, collected by the Census Bu-reau every two years, and found that a home’s tran-sition from rental to ownership provides more than$1,300 per year in value to nearby homes. In otherwords, a house is worth more when the landlord nextdoor decides to sell to an owner-occupant.That presents challenges when listing propertiesin areas that have seen more rentals in recent years.“In Orlando, we have a lot of short-term rentalsand vacation rentals, and we have areas with a lotof single-family rental housing,” says Steve Mer-chant, ABR, CIPS, chairman of the Orlando RegionalREALTORS® Association. “Often, buyers find out aneighborhood has rentals, and they end up buyingin another place that doesn’t have as much rentalactivity.

“But there aren’t enough homes on the market
for everyone to have that luxury,” he adds.

If you’re listing properties in a market with a
large number of rentals, aim your marketing at
value-oriented buyers.

Merchant says some buyers are willing to make
concessions on features in order to be in an area with
a greater percentage of owner occupants. But others
will put the owner-occupancy issue aside in order to
get just the home they want.